Pending Home Sales Slump as Housing Supply Dwindles, Leaving Buyers With ‘Very Few Options’
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The numbers: Pending home sales dropped 3.8% in December, according to the monthly index released by the National Association of Realtors. The index measures transactions where the contract has been signed for an existing-home sale, but the sale has not yet closed. As such, it is an indicator for the direction of existing-home sales in subsequent months.
Key details: Compared to a year earlier, pending home sales were down 6.9%. On a regional basis, pending sales dropped by 10% or more in both the Northeast and the West, though every part of the country experienced a slowdown.
The big picture: The downturn in pending home sales was a reflection of the inventory challenges home buyers have faced, said Lawrence Yun, chief economist for the National Association of Realtors, in the report.
“Pending home sales faded toward the end of 2021, as a diminished housing supply offered consumers very few options,” Yun said. “Mortgage rates have climbed steadily the last several weeks, which unfortunately will ultimately push aside marginal buyers.”
The good news for prospective buyers, Yun said, is that the supply of homes for sale should improve over the course of the year amid a surge in home-construction activity. Nevertheless, Yun projected that existing-home sales will be nearly 3% lower in 2022 than they were in 2021.
What they’re saying: “While the index declined in seven of the 12 months of 2021, the yearly value was above the prior two years, pointing to increased overall housing activity, also mirrored in the higher pace of sales,” said George Ratiu, manager of economic research at Realtor.com.
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